Texton Property Fund looks to reduce its reliance on office market

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Rob Kane, CEO of Texton Property Fund said the company was looking at selected opportunities in the industrial and retail sectors that would enhance its offering to shareholders. Rob Kane, CEO of Texton Property Fund said the company was looking at selected opportunities in the industrial and retail sectors that would enhance its offering to shareholders.

Texton Property Fund Limited previously Vunani Property Investment Fund is looking to reduce its exposure to the struggling office market by diversifying into other property sectors and look at opportunities in Africa.

Despite the office being the worst-performing sector in South Africa property market in recent years, Texton, on Monday reported distribution of 85.47c a share for the 12 months to June, up 10.6% year on year.

Its revenue increased to 273 million rand for the year ending 30 June 2014 from 229 million rand for the same period in 2013.

Net property income grew 18.8 per cent from 154 million rand in 2013 to 184 million rand in 2014 and profit before income tax increased to 195 million rand from 60 million rand.

Basic and diluted earnings per share increased to 123.60 cents in 2014 from 120.49 cents in 2013 and net asset value per share was up 15.4 per cent from 861.9 cents to 993.89 cents.

“This has been a busy and very positive year for the fund. A number of fundamental changes have provided us with a solid platform from which to grow our asset base and deliver sustainable, superior earnings for our shareholders,” Rob Kane, CEO of Texton Property Fund said.

The company successfully changed its name following the cession and assignment of an asset management agreement to Texton Property Investments Proprietary.

Texton indicated that a core discipline of the fund is the continued tight management of its assets.

Kane said Texton was looking at selected opportunities in the industrial and retail sectors that would enhance its offering to shareholders.

Texton, which has a significant exposure to the office sector compared with the 51-odd JSE listed property counters has seen vacancies in its property portfolio improve to 5.3%, from 5.6%.

The Fund has seen a marked increase in acquisition activity, with growth of just over 40%. The Fund acquired four properties, valued at just under R600 million and another R380 million assets currently in the process of being transferred. 

The imminent transfer of the PD Naidoo portfolio will result in 6,2% of Texton shares being owned by black empowered individuals/entities and will provide the Fund with a minimum Level 3 rating.

Evan Robins, portfolio manager at Old Mutual Investment Group, said while Texton’s results for the first half of the year — to December 2013 — disappointed, with income growth of only 5%, it was commendable that the fund still managed double-digit growth for the full year, near the top of management’s guidance.

"Even though offices in general are struggling, Texton’s operating metrics were good, which shows the benefits of a niche, specialised management team," Robins said.

Texton is trading at a sizable discount to the sector, with a forward yield exceeding 9% versus the sector average of 7.3%. Mr Robins said the stock was probably so cheap because the market did not like offices. Texton is also still relatively small and illiquid, which has kept some of the bigger institutions on the sidelines.

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Listed Property / REITs  |  Rob Kane  |  Real Estate Investment Trusts (REITs)  |  Texton Property Fund  |  Evan Robins